Key decisions in M&A transactions are shaped earlier than you think.
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Four people are seated at a conference table in a modern meeting room. Two individuals on one side of the table listen attentively, while the person in the foreground gestures and speaks, holding notes. The atmosphere suggests a formal business meeting.
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Key decisions in M&A transactions are shaped earlier than you think.

Four people are seated at a conference table in a modern meeting room. Two individuals on one side of the table listen attentively, while the person in the foreground gestures and speaks, holding notes. The atmosphere suggests a formal business meeting. Letter of Intent, Term Sheet, SPA — at which stage are transaction terms really shaped?

In mid-market M&A transactions – where founders and owners act as sellers — key decisions are very rarely made at the stage of the Share Purchase Agreement.

In practice, decisive outcomes are far more often determined earlier: during initial discussions, oral arrangements, or at the stage of signing a Letter of Intent or a Term Sheet.

It is precisely at this point — when information asymmetry is still significant and the owner’s emotional involvement high — that transaction parameters become fixed and later prove difficult to reverse.

Below, we outline the key issues that in practice determine not whether a transaction will close, but rather:

  • on what terms,
  • with what level of negotiating flexibility,
  • and with what level of risk on the seller’s side.

1. After accepting an investor’s offer, should a seller stop engaging with other potential buyers?

This is one of the decisions that most rapidly affects the seller’s negotiating position.

In many cases, accepting the first satisfactory preliminary offer — often from an investor familiar with the company, but without in-depth analysis — leads to an effective closure of the process to other potential buyers.

Does maintaining alternative options really “damage the relationship,” or does it rather:

  • stabilise the process,
  • discipline the timeline,
  • and limit renegotiation attempts by the buyer?

Naturally, a potential buyer seeks to obtain exclusivity as early as possible. What does market practice look like in this respect, and which approach best protects the seller’s interests – these strategic issues need to be addressed at the very start of the process.

2. Letter of Intent or Term Sheet — what are the real differences?

When is a Letter of Intent more appropriate, and when does a Term Sheet work better?
Does the distinction between the two affect:

  • the scope of the parties’ commitments,
  • negotiating flexibility,
  • and the ability to adjust key terms later in the process?

Each of these documents — although formally non-binding — to some extent “freezes” transaction parameters and has a material impact on the further course of the transaction.

3. When are price and other key terms really negotiated?

Are negotiations over price, valuation adjustment mechanisms, earn-outs, post-transaction governance, or liability allocation conducted primarily at the stage of the SPA? Or do decisive arrangements emerge earlier — at the Letter of Intent or Term Sheet stage — when:

  • time pressure is lower,
  • genuine alternatives still exist and bargaining power is more balanced,
  • the parties are less deeply committed to the process and their expectations are not yet firmly “anchored”?

Experience shows that a poorly negotiated preliminary document — even with highly experienced advisors involved at the SPA stage — often results in a suboptimal transaction structure and increased risk for the seller.

4. Which provisions of the Letter of Intent truly determine the transaction structure?

Which elements are largely neutral in practice, and which substantially determine:

  • valuation,
  • risk allocation,
  • the seller’s post-closing liability,
  • corporate governance and control mechanisms after the transaction?

We frequently observe situations where a “soft,” non-binding Letter of Intent signed at an early stage becomes an unquestionable reference point during negotiations of the sale and purchase agreement.
This raises a fundamental question: does the Letter of Intent merely reflect preliminary intentions, or should it be treated as a central element of the negotiation process?

5. Transparency in presenting the business — where is the real boundary?

How much should owners and management disclose at the early stages of the process? Which operational or financial risks, in Polish market conditions, are considered “acceptable,” and which:

  • resurface with greater force during due diligence,
  • become a pretext for renegotiation,
  • may lead to investor withdrawal,
  • or materialize after closing, burdening the sellers?

Attempting to superficially “smooth” the company’s image at an early stage may increase the chances of securing an attractive offer and signing a Letter of Intent, but it often comes at the cost of increased risk for the seller later in the process.

6. Are successful M&A negotiations a matter of talent or structure?

Does negotiating advantage in M&A transactions stem primarily from sophisticated negotiation techniques? Or equally from:

  • a well-designed process,
  • awareness of critical decision points,
  • and skillful management of expectations, decision sequencing, and deal momentum?

In practice, a properly structured process gives the company’s owner real control over both the course of the transaction and the level of risk — whether dealing with a financial investor or a strategic buyer.

We will return to the above topics in future publications, discussing them through the lens of decisions that carry real financial consequences — well before due diligence begins and the first draft of the SPA appears.

If you are currently in early stage discussions with an investor and want to assess whether you may be giving up key decisions too early — let’s talk.